ACC 2013 Final exam review MSU

What type of account is a Bond Discount

A) Contra Asset

B) Contra Liability

C) Normal Liability

D) Normal Asset

B) Contra Liability

What type of account is a Bond Premium

A) Contra Asset

B) Contra Liability

C) Normal Liability

D) Normal Asset

C) Normal Liability

What type of account is a Treasury Stock?

A) Contra Asset

B) Contra Equity

C) Normal Liability

D) Normal Asset

B) Contra Equity

Which statement best expresses the 'going concern' concept?

A) A company is assumed to continue operations indefinitely, benefitting from assets and paying liabilities.

B) A company has a concern about its future.

C) The auditors have issued an opinion that expresses ongoing concerns about the financial stability of a company.

D) There is a concern about the financial health of an industry overall and the abilities of the companies that are part of that industry to generate profits.

A) A company is assumed to continue operations indefinitely, benefitting from assets and paying liabilities.

On April 1, Bitner Company borrowed $10,000 from Century Bank. The note was for 1 year and carried an 8% annual interest rate. Bitner Company's year-end is December 31. What kind of adjusting entry, if any, needs to be recorded at year-end by Bitner Company to properly record events associated with the loan from Century Bank?

A) $600 to record interest expense and interest payable

B) $800 to record interest expense and interest payable

C) $400 to record interest expense and interest payable

D) no adjusting entry is necessary

A) $600 to record interest expense and interest payable

Stephanie's Fashions sold $2,000 of merchandise on a given day, plus 5% sales tax. All sales were on account. How should Stephanie's Fashions record the sales transactions?

A) dr Accounts Receivable cr 2,100 Sales Revenue cr 2,100

B) dr Accounts Receivable 2,100 cr Sales Tax Payable cr 100 Sales Revenue 2,000

C) dr Accounts Receivable 2,100 cr Sales Tax Expense 100 cr Sales Revenue 2,00

D) dr Accounts Receivable 2,000 crSales Revenue 2,000

B) dr Accounts Receivable 2,100 cr Sales Tax Payable cr 100 Sales Revenue 2,000

Jamal Company employees are paid at the end of every week. There are 2 employees and each are paid $500 per week. Jamal withholds $50 in Federal tax and $25 in state tax per employee. Jamal then remits these taxes withheld at the end of every quarter. At the end of every week, Jamal Company would record a payroll transaction that would:

A) Decrease Cash by $850 and increase Salary Expense by $1,000

B) Decrease Cash by $500 and increase Salary Expense by $500

C) Decrease Cash by $450 and increase Salary Expense by $450

D) Decrease Cash by $425 and increase Salary Expense by $425

A) Decrease Cash by $850 and increase Salary Expense by $1,000

Jamal Company employees are paid at the end of every week. There are 2 employees and each are paid $500 per week. Jamal withholds $50 in Federal tax and $25 in state tax per employee. Jamal then remits these taxes withheld at the end of every quarter. When Jamal Company records the weekly salary payments, what accounts would be impacted?

A) Cash, Salaries Payable, Federal tax expense, and state tax expense B) Cash, Salaries Expense, Federal taxes payable, and state taxes payable

C) Cash, Salaries Expense, Federal tax expense, and state tax expense D) Cash and Salaries Expense only. Any Federal or state tax accounts would be impacted at quarter-end when Jamal Company pays those taxes

B) Cash, Salaries Expense, Federal taxes payable, and state taxes payable

Technical Services, Inc. (TSI) guarantees the quality of its instructional services. TSI earned $40,000 of cash revenue from instructional services in Year 1. The company estimates that future warranty claims will be 6 percent of revenue. During Year 1, TSI paid $700 cash on warranty claims. Based on this information, the amount of net income and the net change in cash for Year 1 would be

A) $37,600 / $39,300.

B) $37,600 / $37,600.

C) $39,300 / 39,300.

D) $38,300 / $39,300.

A) $37,600 / $39,300.

On January 1, Year 1, Booker Corporation issued a $5,000 face value bond that sold for 90. The bond had a five-year term and paid 10% annual interest. The company used the proceeds from the bond issue to buy land. The land was leased for $600 of cash revenue per year and was sold at the end of the 5th year for $4,200 cash. The straight-line method of amortization is used. The carrying value of the bond liability on January 1, Year 1, would be

A) $4,500.

B) $4,600.

C) $5,000.

D) $4,000.

A) $4,500.

On January 1, Year 1, Booker Corporation issued a $5,000 face value bond that sold for 90. The bond had a five-year term and paid 10% annual interest. The company used the proceeds from the bond issue to buy land. The land was leased for $600 of cash revenue per year and was sold at the end of the 5th year for $4,200 cash. The straight-line method of amortization is used. The amount of interest expense reported on the Year 1 income statement would be

A) $450

B) $400.

C) $600.

D) $500.

C) $600.

On January 1, Year 1, Booker Corporation issued a $5,000 face value bond that sold for 90. The bond had a five-year term and paid 10% annual interest. The company used the proceeds from the bond issue to buy land. The land was leased for $600 of cash revenue per year and was sold at the end of the 5th year for $4,200 cash. The straight-line method of amortization is used. Interest expense reported on the income statement over the life of the bond would

A) increase by $100 each year.

B) be the same each year.

C) decrease by $100 each year.

D) equal the stated rate of interest.

B) be the same each year.

On January 1, Year 1, Booker Corporation issued a $5,000 face value bond that sold for 90. The bond had a five-year term and paid 10% annual interest. The company used the proceeds from the bond issue to buy land. The land was leased for $600 of cash revenue per year and was sold at the end of the 5th year for $4,200 cash. The straight-line method of amortization is used. The carrying value of the bond liability on December 31, Year 2 would be

A) $5,000.

B) $4,500.

C) $4,900.

D) $4,700.

D) $4,700.

January 1, Year 1, Booker Corporation issued a $5,000 face value bond that sold for 90. The bond had a five-year term and paid 10% annual interest. The company used the proceeds from the bond issue to buy land. The land was leased for $600 of cash revenue per year and was sold at the end of the 5th year for $4,200 cash. The straight-line method of amortization is used.

The total (net) amount of liability associated with the bond issue would

A) always be equal to the face value of the bond payable.

B) decrease each year as a result of the amortization of the discount.

C) remain the same each year.

D) increase each year as a result of the amortization of the discount.

D) increase each year as a result of the amortization of the discount.

On January 1, Year 1, Booker Corporation issued a $5,000 face value bond that sold for 90. The bond had a five-year term and paid 10% annual interest. The company used the proceeds from the bond issue to buy land. The land was leased for $600 of cash revenue per year and was sold at the end of the 5th year for $4,200 cash. The straight-line method of amortization is used.

The amount of the cash outflow for interest expense in Year 3 would be A) $600.

B) $400.

C) $500.

D) $ 0.

C) $500.

On January 1, Year 1, Kordner Company issued a $20,000 face valuebond that sold for 110. The bond had a ten-year term and a statedannual interest rate of 8%. The straight-line method of amortization is

The carrying value of the bond liability on January 1, Year 1, would be

A) $22,000.

B) $20,000.

C) $21,800.

D) $20,200.

A) $22,000

On January 1, Year 1, Kordner Company issued a $20,000 face value bond that sold for 110. The bond had a ten-year term and a stated annual interest rate of 8%. The straight-line method of amortization is used.

The amount of interest expense reported on the company's Year 1 income statement would be

A) $1,200.

B) $1,600.

C) $1,400.

D) $1,050.

C) $1,400.

On January 1, Year 1, Kordner Company issued a $20,000 face value bond that sold for 110. The bond had a ten-year term and a stated annual interest rate of 8%. The straight-line method of amortization is used.

The amount of interest expense reported on the company's Year 2 income statement would be

A) $1,200.

B) $1,600.

C) $1,400.

D) $1,050.

C) $1,400.

If a bond sells at a discount, which of the following is true?

A) The market interest rate is expected to increase above the stated interest rate on the bond.

B) The market interest rate at the time of issue is less than the stated interest rate on the bond.

C) The market interest rate at the time of issue is the same as the stated interest rate on the bond issue.

D) The market interest rate at the time of issue is greater than the stated interest rate on the bond.

D) The market interest rate at the time of issue is greater than the stated interest rate on the bond.

Indiatlantic Company can borrow up to $50,000 on its state bank line of credit. The company agrees to pay interest monthly at 2% above prime. Funds are borrowed or repaid on the first day of each month.

The amount of interest to be accrued on March 31 is

A) $225.00.

B) $100.00.

C) $200.00.

D) $133.33.

Month Amounts Borrowed or (Repaid) Prime Rate Jan. $15,000 6%

Feb. $(5,000) 5%

March $30,000 4%

C) $200.00.

Xenon Company experienced an accounting event that affected its financialstatements as indicated below:Which of the following events could have caused these effects?

Assets = Liab. + Stk. Equity Rev.− Exp. = Net Inc. Cash Flow

+ + NA NA NA NA + FA

A) A bond issued at face value.

B) A bond issued at a discount.

C) A bond issued at a premium.

D) answers a, b, and c are all correct.

D) answers a, b, and c are all correct.

Starkville Corporation had the following shares of stock outstanding at December 31, Year 3: Common Stock, $50 par value, 40,000 shares outstanding; and Preferred Stock, 6 percent, $100 par value, cumulative, 10,000 shares outstanding. Dividends for Year 1 and Year 2 were in arrears. On December 31, Year 3, Starkville declared total cash dividends of $250,000. The total amounts payable to preferred stockholders and common stockholders, respectively, are:

A) $60,000 / $190,000.

B) $120,000 / $130,000.

C) $180,000 / $70,000.

D) $125,000 / $125,000.

C) $180,000 / $70,000.

The Kansas Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's stockholders' equity included $1,200 of retained earnings in addition to its contributed capital. The entry to record the original issue of 200 shares of stock would

A) increase cash by $4,000 / increase common stock and paid-in capital in excess of par value by $1,000 and $3,000, respectively.

B) increase cash by $4,000 / increase common stock by $4,000.

C) decrease cash by $4,000 / increase common stock common stock by $4,000.

D) increase cash by $1,000 / increase common stock by $1,000.

A) increase cash by $4,000 / increase common stock and paid-in capital in excess of par value by $1,000 and $3,000, respectively.

The Kansas Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's stockholders' equity included $1,200 of retained earnings in addition to its contributed capital. The entry to record the purchase of the 10 shares of the company's own stock would

A) decrease assets / decrease stockholders' equity.

B) decrease assets / increase stockholders' equity.

C) decrease assets / increase treasury stock.

D) both answer a and answer c are correct.

D) both answer a and answer c are correct.

The Kansas Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's stockholders' equity included $1,200 of retained earnings in addition to its contributed capital. What effect would reissuing the 5 shares have on the company's paid- in excess of the cost of treasury stock account?

A) No effect.

B) Increase paid-in excess of the cost of treasury stock account by $25. C) Increase paid-in excess of the cost of treasury stock account by $100. D) Decrease paid-in excess of the cost of treasury stock account by $75

B) Increase paid-in excess of the cost of treasury stock account by $25.

The Kansas Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's stockholders' equity included $1,200 of retained earnings in addition to its contributed capital. The total amount of stockholders' equity at the end of the first year would be

A) $1,200.

B) $5,200.

C) $5,150.

D) none of the above.

C) $5,150.

Which of the following is an advantage of the corporate form of business organization?

A) Double taxation

B) Amount of regulation

C) Entrenched management

D) Limited liability

D) Limited liability

Arens Company is authorized to issue 100,000 shares of common stock. The company issued 60,000 shares of common stock and later repurchased 15,000 shares of its own common stock. How many shares are outstanding?

A) 45,000

B) 60,000

C) 100,000

D) 40,000

A) 45,000